Wednesday, December 17, 2014

Section 138, Jurisdiction, and Dashrath Rupsingh Rathod

In August this year, three judges handed down the decision in Dashrath Rupsingh Rathod v State of Maharashtra [(2014) 9 SCC 129], restricting jurisdiction over the offence under Section 138 Negotiable Instruments Act. Trial courts across the country have been returning complaints ever since, as the decision retrospectively applies to a certain class of pending cases. Here, I discuss this landmark case, looking at Justice Sen's approach to understanding the Section 138 offence for jurisdictional purposes.

Lets not place the cart before the horse, and get a hand of Section 138 - the infamous cheque bouncing offence. The bouncing of cheques as unpaid is not sufficient: a proviso adumbrates several steps that must be fulfilled to enable one to file a complaint. These are:
  • The drawer issues a negotiable instrument towards discharge of a legally enforceable debt;
  • The instrument is subsequently presented by the /payee within six months of issue, and is dishonoured by the drawee bank;
  • The payee issues a notice within thirty days of dishonour to the drawer regarding dishonour;
  • The drawer fails to pay the amount fifteen days after receipt of notice.
The question before the Supreme Court in Dashrath was very specific: would courts at the place from where where statutory notice was sent have jurisdiction to entertain complaints? Conflicting decisions had been rendered by co-ordinate benches of the Supreme Court on the point, to resolve which a three judge bench had been constituted. But the leading judgment of Justice Sen answered a different question: were complaints complaints filed at places other than where the drawee bank is located maintainable? Overturning more than a decade of settled precedent, the Court answered this question in the negative. 

The Court's Approach to Jurisdiction
To understand this aspect better, we need to revisit the structuring of Section 138. A person is "deemed to have committed an offence" when the cheque issued is dishonoured upon presentment. But this is followed by a proviso, which states "nothing contained in this section shall apply unless" the steps discussed above are complied with in full.

Courts before Dashrath considered these conditions an integral part of the offence, and held them relevant for determining the jurisdiction of courts. Naturally, it meant a complaint could be filed at multiple places. All this changed with Dashrath, for the Court viewed the "offence" under Section 138 as separate from the "proviso", which only created conditions for maintainability of a complaint. Viewing this to be the 'offence' under Section 138, the Court turned to jurisdiction in Chapter XVII of the Cr.P.C. The common element therein was of jurisdiction being determined by the location of the 'offence', nothing else. Thus, as the offence itself was complete whenever the drawee bank returned the cheque as unpaid, jurisdiction would be restricted to that court alone.

Statutory Interpretation 2.0
If we accept this interpretation of Section 138, limiting jurisdiction seems the only correct conclusion possible. The Court goes to great lengths to remind us how the simple solution it offers would remedy the 'mischief' created by allowing for multiple avenues to file complaints. How simple the solution remained after ordering retrospective application of the judgment remains a controversial point, but that doesn't concern us here. A deeper look is warranted at the interpretation of Section 138 itself. There are two problems which emerge, one based on a holistic reading of the Negotiable Instruments Act, and another specific to the structure of Section 138 therein.

One: Reading the Act Holistically
The separate, concurring opinions of Thakur and Sen JJ. elaborate the point of construing the 'offence' of Section 138 shorn of its proviso, observing the latter imposed additional conditions on taking cognizance. To quote Sen J. "the cognizance of the crime ... can be taken only when the concomitants or constituents contemplated by the Section concatenate with each other". But when Section 142 of the Act specifically addresses the question of cognizance, is such interpretation not akin to re-writing the text of the statute? After all, the Legislature was open to place these conditions within Section 142, as opposed to Section 138. In ignoring the text, the Court re-wrote the statute, without due regard to established canons of judicial restraint.

Two: The Structure of Section 138
Are Provisos in the section creating an offence anomalous? No. These may be present in slightly different forms though. For instance, Section 300 IPC (defining culpable homicide amounting to murder) and Section 499 IPC (defining defamation), contain Exceptions, which carve out and protect conditions/situations from the broad definition of the offence. These have a direct bearing on the offence itself, for facts which fall within an exception make conduct a 'non-offence'. Cognizance is a step much ahead: it is the application of the judicial mind for determining whether or not proceedings should commence. The difference in stages is important: for instance, if its not an offence, the police may refuse to conduct an investigation; a quashing petition would be against the complaint and not a judicial order and so on.

The proviso to Section 138 tells us that mere bouncing of a cheque is not an offence, similar to how the exceptions to Section 300 tell us that simply killing another person is not murder. Admittedly, it so happens that the stage of taking cognizance is very close to the filing of a complaint in the case of Section 138. But the approach of separating provisos from the section may be transplanted to other statutes, with more onerous consequences.

Right End, Wrong Means
That is my take on the decision. Limiting avenues for filing complaints does indeed simplify the law and prevent its abuse by either party. This was undoubtedly needed in context of Section 138. But these desirable conclusions have been reached through troublesome paths. Petitions are currently pending in the Supreme Court which may result in re-assessing Dashrath [SLP (Cri) 8073/2014]. It would be interesting to see how the Court develops a fascinating, and hugely important area of law.


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  2. Very enlightening for a newbie to this law , thankyou sir